Canada must move on income inequality: Broadbent Institute

OTTAWA — Canada is moving in the wrong direction and must address its extreme and growing income inequality, according to a new discussion paper from the Broadbent Institute.

The paper, released to Postmedia News on Monday, argues that developing a comprehensive policy agenda — which could include affordable housing, improvements to Employment Insurance, “fair” taxes and a national prescription drug program — is needed to address the problem.

What’s concerning is that inequality is getting worse instead of better, and while Canada has the financial means to turn this around, those steps aren’t being taken, said former NDP leader Ed Broadbent, the founder of the left-leaning institute.

“We’ve had this policy of slashing taxes, and particularly disproportionately, slashing the taxes of the rich. It’s time we reverse this,” Broadbent said.

“It’s not as if we don’t have the wealth, but it’s the distribution of the wealth that really matters.”

Income inequality, sometimes known as the shrinking of the middle class, occurs when there is a large polarization between the top and the bottom of society in terms of their share of economic resources, according the institute.

The Conference Board of Canada and the Organisation for Economic Co-operation and Development have both recently pointed out that Canada is becoming more unequal, more quickly than most other countries in the OECD, Broadbent said.

For instance, the Conference Board of Canada reported in 2011 that, between the mid-1990s and the late 2000s, Canada had the fourth-largest increase in income inequality out of 17 peer countries. Canada was ranked 12th out of those countries, a slip to “below the average.”

One of the effects of this is that there’s less upward mobility, Broadbent said, adding that there’s “overwhelming” evidence that an unequal society decreases the opportunity for climbing.

“Most Canadians grew up with the expectations that their son or daughter could be whatever they want to be, whether it’s a hockey player or a brain surgeon … now the reality is, if you want to live the ‘American dream’, you should move to Sweden,” Broadbent said.

And beyond economic indicators, income inequality affects everything from health to political participation to crime rates, Broadbent said. And what people need to understand is that this affects everybody in the population – not just the poor, he said.

Several recent studies have found that more “equal countries,” such as Germany and Sweden, do better overall than “unequal countries” such as Canada and the United States when it comes to indicators such as life expectancy, the incidence of mental illness, obesity and homicide rates, the institute’s paper noted.

“Yes, the poor suffer. And we know that, and we have too high a level of poverty, but the really serious thing that we should be aware of is that, with this degree of inequality, everybody suffers,” Broadbent said.

There is no “single magic bullet,” to achieve greater equality, the paper said, and urged that a comprehensive policy agenda must become a core political commitment. And while a commitment to equality must come from all levels of government, leadership must come from the feds, the paper said.

“The federal government has many of the key levers — especially income security programs, a progressive tax system, and transfers to the province — needed to combat inequality,” the report said.

The report, Towards a More Equal Canada, is part of the Broadbent Institute’s Equality Project, which was launched earlier in 2012.